That's what happens to kids. Up to eight years old, if I recall correctly, they're unable to tell apart imagination from reality. If they think of something, say a monster hiding at home, it exists in reality. Which is a big problem while watching movies that can have scary parts as they now think they're real.
A six year old can perceive normally. They really don’t see people who aren’t there. They consciously know the difference between seeing a monster and thinking it exists. They can mis-attribute information by categorizing something they see as a monster. They play and they get really invested in it. Children are not psychotic. They are using their imagination to explore reality.
I see the monsters in the room. I spent four months as a bipedal wolf feeling wind in my fur and the motions of my tail. I truly believed I wasn’t human and the humans would kill me as soon as they found that out. My childhood memories were replaced by imagined ones.
Well, the part of believing they are something they aren't, I agree, it doesn't happen to them. But I have kids and they positively believe there are monsters in the house, and they positively believe toys are alive, because they saw toy story. Nothing I can say will move them from that belief.
